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The Importance of VPPs to Support America’s Energy Resilience

Tuesday, Mar 21 2023

SEIA Comms Team
residential solar panels

Extreme weather events, cybersecurity threats and volatility in energy markets at all levels puts intense strain on America’s power grid. 

Virtual power plants (VPP) are an important tool to secure the resiliency of this critical system. 

What is a VPP, you ask? As RMI puts it, VPPs are comprised of hundreds or thousands of households and businesses that offer the untapped potential of distributed energy resources (DER) like thermostats, electric vehicles (EV), appliances, batteries and of course, solar panels, to support the grid. 

VPPs are emerging on the electric grid because they provide a combination of energy security, reliability, resiliency and efficient use of energy resources. Communities across the country can benefit from VPPs in extreme cold or heat and other climate-related episodes that strain our power grid. 

This innovative solution is positioned for massive growth thanks to the 2022 Inflation Reduction Act, which created or enlarged tax incentives for EVs, electric water heaters, solar panels and other devices. 

VPPs serve as aggregators of distributed assets like solar and storage to allow these resources to punch above their weight. This can take serious strain off the grid. RMI estimates that by 2030, VPPs could reduce America’s peak demand by 60 gigawatts (GW), the average consumption of 50 million households, and by more than 200 GW by 2050. 

While it seems like a novel idea, solar and storage companies have been making investments in this model for years. 

We’re also seeing promising opportunities for DERs providing solutions in wholesale markets — like ISO-New England, which paved the way for DERs to bid into their capacity market, and Texas’ ERCOT, which created an aggregated DER pilot to use these resources for important grid services. 

A report by Vote Solar and Solar United Neighbors illustrated the worsening crisis of grid outages across the United States and outlined how to leverage local electricity to avoid yet another series of power outages that could impact millions of people. One of the best features of VPPs is that they come in so many different shapes and sizes. One example is a bring-your-own-device (BYOD) program, where households can use existing batteries on their homes or sign up for a program after buying a new battery system. In this case, utilities may offer upfront incentives with the express permission to use the battery during certain times. 

Another example is a battery lease program where homeowners can "lease" batteries from a utility for a low monthly rate. Vermont’s Green Mountain Power has a program that offers leases for two 10 kW batteries. Homeowners get backup power for cheap and agree to let the utilities use the batteries when needed to reduce grid costs for all customers. 

Let’s look at a few successful VPP case studies: 

Octopus Energy and Enphase 

Last month, Octopus Energy and Enphase announced a new partnership that allows residential customers to integrate home solar and battery solutions into their energy plan to unlock low-cost residential energy rates. As part of the agreement, Octopus Energy will be able to control the customer’s battery to reduce usage when the grid is the most constrained and help save customers hundreds of dollars each year. 

Octopus plans to create a VPP with the Enphase home battery systems and will be bidding these DERs in Texas’ ERCOT ancillary markets — a first of its kind for these assets. 

Stem steps up in California 

Stem, a clean energy solutions and services provider, which maximizes the economic, environmental, and resiliency value of energy assets, said in September that its VPP dispatched approximately 86 megawatts (MW), enough to power 103,000 homes, during a heatwave in September that prompted the California Independent System Operator to call on people to conserve their power. 

Sunrun and PG&E 

Sunrun announced plans last month to create a 30 MW VPP by enrolling up to 7,500 existing and new rooftop solar and battery systems in Pacific Gas & Electric’s territory in California. 

Storage systems that enroll in the program will be asked to discharge power to the grid every day between 7 p.m. and 9 p.m. from August through October, a period when electricity demand in California tends to be the highest. Customers will be compensated with a $750 upfront payment and given a free smart thermostat. 

Establishing VPP standards 

Companies including GM, Ford, Google, SunPower and Sunrun are working together to establish standards for scaling up VPPS. 

Energy transition nonprofit RMI will host the initiative, the Virtual Power Plant Partnership (VP3), which will also aim to shape policy for promoting the use of the systems, the companies said. 

Partnerships are the key 

SunPower is also teaming up with Ohm Connect, a company that pays its customers for saving electricity when the grid is stressed. With SunPower, OhmConnect is greatly expanding the ecosystem of homes that can leverage the energy they generate to help stabilize the increasingly vulnerable grid. 

Through the collaboration, SunPower's tens of thousands of solar and storage customers will have the option to participate with the OhmConnect platform. Participants receive incentives to automatically dispatch energy reserves to the grid during peak demand times. Together, the companies are creating a scalable way to impact grid reliability, while enabling homeowners to save more money on their systems and energy bills. 

Beyond the mainland to Puerto Rico 

Canary Media reported in November that more than 7,000 homes equipped with solar panels and batteries will form Puerto Rico’s first VPP. Sunrun is developing the 17 MW system, which is meant to reduce power interruptions and fluctuations on the main electric grid. 

Sunnova also has 40,000 solar customers on the island and told Canary it could provide 1,000 MW of electricity over the next 10 years if allowed to virtually aggregate those systems. 

These VPP solutions are a valuable tool for securing the electricity grid, ensuring reliable, affordable and clean power in times of stress on the system. The solar and storage industry will continue to innovate on these essential grid services and expects the VPP market to soar in the Solar+ Decade.

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